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Case Studies

Enterprise Africa! field teams are conducting rigorous case studies in three distinct, but related categories:

From time to time, we will update our progress with dispatches from the field.  The following are studies currently in progress.

Entrepreneurial Business Development

Peace through Commerce, Rwanda

Many countries in Africa and elsewhere are going through the painful and costly process of rebuilding a social fabric torn asunder by armed conflict. Though economists have long claimed that international trade promotes peace by preventing conflicts from emerging,  recent Enterprise Africa! fieldwork in Rwanda suggests that commerce might also play a role in post conflict reconciliation, by bringing together previously hostile parties in a spirit of cooperation for mutual benefit. 

The conventional wisdom regarding post-conflict resolution stresses the formal political processes of public adjudication; however, research demonstrates that these top-down political means of reconciliation are incomplete and often short-lived. 

Our initial study suggests that commercial relationships increase the likelihood of sustained peace over the long-term.  What’s more, it seems that opening the once government-dominated coffee markets is what triggered these relationships.   Proving this link in a more robust way would be an exciting breakthrough for post-conflict policy solutions and would give those who would advocate for peace, a compelling reason to promote commercial activity and economic growth.

Building on our preliminary findings in Rwanda, we will subject our hypotheses to rigorous scrutiny by conducting survey work to test the initial findings that liberalization in Rwanda’s coffee industry is leading to reconciliation after one of the most brutal genocides in modern history. 

Questions we will address:

• What institutional arrangements are conducive to increasing trust in society?
• How can commercial activity promote increased cooperation and informal reconciliation?  Is the reconciliation that is reported in Rwanda necessitous and short-term or something more substantial and sustainable? Is it mutual gains from trade or is it simply an avenue where individuals can have repeated interactions with their former enemies?
• What are the necessary preconditions for commercially-driven reconciliation?
• What practical lessons can we learn for dealing with future post-conflict situations?

Specialty Coffee - Rwanda

State Power, Entrepreneurship, and Coffee: The Rwandan Experience

In some countries, particular industries play especially important roles. In the U.S., for example, the automotive industry has provided hundreds of thousands of manufacturing jobs and helped shape the image of America as the land of the automobile. More recently, the computer industry has helped create a new image of the U.S. as a high-tech, well-connected service economy. In both industries, entrepreneurial efforts have created a wide variety of benefits for Americans and for consumers in other nations.

In Rwanda, the coffee industry has played a particularly important role in the country's development. For many years, coffee was Rwanda's top export and chief source of foreign exchange income. In the twenty-first century the industry remains important: it provides a livelihood for some 500,000 Rwandan families, many of whom work in cooperatives and grow coffee on small plots on the country's hillsides.

In the past two decades, this important sector of the Rwandan economy has been transformed from a highly controlled, politicized industry to a liberalized sector that is quickly developing a prized niche product: specialty coffee. While the industry is benefiting from increased entrepreneurship and freer trade, the people who work in the coffee industry are also benefiting. They are developing wider trading relations, improving skills, increasing their standard of living and, most importantly, finding a path towards reconciliation--all thanks to increased opportunities to sell their product. Freeing the coffee industry from excessive government regulation and control is directly helping to free the people of this country from poverty and conflict.

The rise of the specialty coffee market in Rwanda presents an exciting research opportunity, for this market developed in the aftermath of the Rwandan genocide. It is providing the means for individuals, whose lives were devastated by conflict, to improve conditions for themselves, their families, and their communities. Rwandan coffee growers are competing with other coffee producers to improve their product, expand their knowledge of the worldwide coffee market, and increase demand for their goods.

In this case study we will identify how Rwanda's specialty coffee industry is helping to improve the lives of coffee producers and of other Rwandans. We will focus on identifying and analyzing the ways in which:

• The specialty coffee industry in Rwanda aids in local poverty alleviation and job creation;
• The specialty coffee industry provides opportunities for developing business and management skills;
• The actions of specific coffee entrepreneurs have affected the lives of ordinary Rwandans; and
  entrepreneurial activities within the Rwandan specialty coffee industry provide Rwandans with opportunities to interact in ways that may promote post-conflict reconciliation.
• The ideas presented in this research are the author's and do not represent official positions of the Mercatus Center at George Mason University.

Cell Phone Use - Botswana

Development Goes Wireless, Economic Affairs
(Free to subscribers and university students)

Cell phones have been making a notable impact in developing countries all over the world. Access to communication technology is improving lives, from simply connecting friends and family, to connecting small businessmen and farmers to information and markets.

Botswana has one of the lowest population densities in the world, which has made fixed-line telecommunications costly to expand, and costly to use. As the government owned fixed-line telecommunications authority has scrambled to provide greater access, private mobile phone companies have been filling this gap by expanding coverage throughout the country. The popularity of cell phones is evident in the rapidly growing number of subscribers. In 1999, there were roughly 60,000 cell phone subscribers. Today, Botswana has two mobile network providers that share more than 500,000 subscribers - more than three times the number of fixed-line customers.

The growth in cell phone use has not been limited to Botswana's higher income citizens. Botswana has benefited from high levels of economic growth and a stable government, and is currently classified as a middle-income country. However, there is a large income disparity and roughly half of Botswana's citizens are classified as living below the poverty level, mostly in rural areas. Cell phones have had a positive impact on this part of the population not just by offering access, but through affordable programs like prepaid service and text messaging.

In this case study we will identify the ways in which access to affordable communication through cell phones has helped improve the lives of people in poor and rural areas. In general, we will look at how cell phones have helped:

• Improve communication between friends and family
• Reduce costs for small businesses
• Created opportunities for entrepreneurship
• Provided better access to information
• Encouraged overall economic growth

Kombi Taxis - South Africa

Taxing Alternatives: Poverty Alleviation and the South African Taxi/Minibus Industry 

Taxi turf wars, violence, safety concerns: is there any hope for the troubled Johannesburg taxi industry? The government is betting on a Recapitalisation Programme designed to put new vehicles on the road, shift routes, and return control of ranks to municipalities. Will it work?

To better understand the challenges facing the industry, commuters, and  policymakers, Enterprise Africa! interviewed taxi operators, drivers, and association representatives as well as commuters and government officials to learn first hand the inner workings of the taxi industry, its contributions to poverty alleviation in South Africa, its complex development, and responses of taxi owners and associations to increasing competition.

They reveal that the kombi taxi industry contributes to poverty alleviation in South Africa by providing entrepreneurs with opportunities for economic empowerment; creating jobs in taxi-related industries; and reducing travel time and facilitating travel for commuters. For taxi entrepreneurs, this is often the stepping stone to other more lucrative businesses.

The research suggests that violence in the industry is the reaction of taxi owners and associations to problems with the legal and political environment. Police complicity and poor law enforcement combine to provide incentives for some to use violence to defend otherwise unprotected rights to valuable routes. The government of South Africa now faces a choice between applying a band-aid solution that will disproportionately harm small entrepreneurs or addressing more fundamental issues for a long-term sustainable solution.

The proposed Taxi Recapitalisation Programme is likely to impose significant costs, particularly on small operators, who will be much less likely than larger operators and associations, to be able to bear these costs. It is very likely that this will lead to a government-created cartel in the industry, a loss of jobs, higher transport costs for consumers, and a continued demand for unlicensed taxis. Alternatively the study finds that the government should recognize and enforce the de facto rights to routes that currently exist. However this will only succeed if the legal and political environment—issuing and enforcing rights—improves.

Combi Seeds for Subsistence Farmers - South Africa

Seeds of Hope: Agricultural Technologies and Poverty Alleviation in Rural Africa

"The farmers call the Combi-Pack, Xoshindlala, a Zulu word that means 'chase away hunger,'” reports the study’s author, Karol Boudreaux, “because they believe the product helps them chase away their hunger by offering them higher crop yields on their small holdings.”

Despite having the largest economy in Africa, many of South Africa’s citizens grapple with poverty.  For rural residents especially, poverty is pervasive, and hunger a very real threat.  Government efforts to improve the lives of smallholder farmers and other rural residents are slow to bear fruit.

Enter the private sector, specifically Monsanto South Africa, with the Combi- Pack, a box containing enough maize seed, herbicide, and fertilizer to plant ¼ hectare of maize. Combi-Packs are part of the phenomenon known as marketing to the “bottom of the pyramid.”  Large corporations design and sell products and services to very low-income consumers, billions of individuals who as a group have substantial purchasing power. 

Farmers in KwaZulu-Natal and Mpumalanga provinces who use Combi-Packs along with no-till, or minimum-till, agriculture have increased maize yields.  Now, the farmers raise enough maize that they can feed their families and then sell the excess, earning money to fix homes, buy clothes, and pay school fees.

Furthermore, Combi-Packs combined with no and minimum till agriculture have had beneficial effects for the environment, reducing erosion, and conserving water. Swelekile Alina Nkosi, a farmer in Mlondozi in rural Mpumalanga, enjoys these benefits. “I’m so happy with this way of farming. What will happen when I’m old I don’t know, but one thing is good, and that is now there’s no water cutting through, so my soil is conserved.”

Combi-Packs will not solve all the problems of rural poverty. Land tenure insecurity, high banking costs, and rigid labor laws continue to plague the farmers. However by creating and selling the Combi-Pack, Monsanto is doing something that critics of globalization might find surprising: a multinational company is helping to drive away hunger and better the lives of the rural poor.

Innovative Policies

Land Titling

The Effects of Property Titling in Langa Township, South Africa

Can property reforms create a path to prosperity? In Langa Township, South Africa efforts have been underway for well over a decade to provide secure, legal titles to previously disenfranchised citizens. Today, most homes—though not shacks—have titles. Can this policy serve as an example for others to follow? Has this government policy led to economic growth and poverty alleviation for Langa’s residents?

The South African-based Free Market Foundation (FMF) and the Mercatus Center at George Mason University in Arlington, Virginia, partners in the Enterprise Africa! project, address this and other questions in their new study: The Effects of Property Titling in Langa Township, South Africa.

To better understand the effects of land titling and property reform the researchers—Eustace Davie, Temba Nolutshungu, Jasson Urbach of FMF and Karol Boudreaux and Susan Anderson of the Mercatus Center interviewed homeowners, business owners, and public officials to learn first hand whether or not homeownership is promoting economic growth in the community.

The team found that having a secure title to property does create incentives to improve property and build communities. Secure titles also provide home owners with space for business activities—renting shacks in backyards, opening restaurants, or starting other home-based businesses.  However, the study suggests that is unrealistic to assume that homeowners in the developing world will take that next crucial step and use their titles as collateral for commercial loans that are the key to promoting economic growth.

Home and business owners pointed to the difficulty of repaying loans, the expense and complexity of formal transfers of property, and regulatory burdens that make it costly to grow and expand small businesses as primary reasons why they viewed using home titles as collateral too risky.

Langa residents say that policy makers can encourage property transfers by making the process easier. The current monopoly on property conveyance must be removed in order to promote more home sales. The government can also encourage entrepreneurial home business owners to grow their businesses in the formal sector by reducing regulatory burdens. Current fee, licensing, and certification systems make it difficult for small business owners to grow and expand in the current business environment.

Formal titling is a step in the right direction toward realizing the benefits of property rights for economic development. However, policymakers need to take these additional steps in property and regulatory reform if South Africa is to realize the full potential for economic growth and poverty alleviation.

Trade Liberalization

In the 1960s, the economist and Nobel Laureate James Meade predicted that the country of Mauritius was headed for economic disaster.  Faced with a long list of disabilities that included high fertility rates, limited space, a heterogeneous population, distance from the markets of the developed world, and an economy largely dependent upon a single crop, sugar, Meade said the prospects for Mauritius were poor.  

Forty years later, Mauritius is one of the most prosperous countries in Africa.  The income of the average Mauritian has increased more than threefold over the past 40 years, propelled by high economic growth rates from the mid-1980s to the late-1990s.  Life expectancy has increased from 61 years in 1965 to nearly 73 years in 2005 and literacy rates are high at 85%.  These improvements are so remarkable that many people refer to the Mauritian “miracle.” 

And yet, today’s unemployment rate approaches 10%.  The textile sector, which piloted much of the economic growth of the past two decades, has hit rough, competitive waters.  The public sector is bloated and the education system is failing many students.  The question arises:  is Mauritius a real miracle or something a bit more prosaic?

The growth of the Mauritian economy, and the related improvements in standards of living, provide an opportunity to investigate the role of government policy making in alleviating poverty.  More specifically, this case study will trace the impact of government policies that allowed for the creation of economic processing zones in Mauritius.  Adopted in the 1970s and pushed hard in the 1980s, the Mauritian government’s export-oriented policies created free trade zones, within which investors set up hundreds of enterprises, mainly textile factories.  The development of these enterprises has had a profound effect, socially as well as economically, on the country.
 
In this case study, we will focus on identifying and analyzing:

• The ways in which economic trade zones aid in local poverty alleviation and job creation by empowering different segments of society:  women and local investors/entrepreneurs.
• How these enterprises help workers to develop a variety of transferable skills. 
• How the end of a preferential trading regime has affected Mauritians and their economy. 

Community Based Natural Resource Management

Community-Based Natural Resource Management and Poverty Alleviation in Namibia: A Case Study

Can indigenous people protect their environment and, at the same time, develop strong businesses that help diversify their livelihoods and alleviate poverty? In Namibia, the answer is yes.

Through community-based natural resource management (CBNRM), Namibians who form conservancies now have legal rights to manage wildlife and benefit from tourism. With these secure rights, and with help from NGOs and the government, something extraordinary is happening: wildlife numbers, which were decimated by war and poaching, are rising, and ecosystems are rebounding. Namibians also now have the chance to build businesses based on eco-tourism and related activities, and these businesses are helping to improve the lives of conservancy members.

Namibia’s experience with CBNRM may provide a strong model for other countries: devolving secure legal rights to local people has gone a long way towards promoting positive outcomes both in terms of conservation and economic development.

While it is among the best examples of CBNRM in Africa, the Namibia program has some weaknesses.

These include:

• no legal right for conservancies to exclude unwanted/harmful outsiders;
• a confused process for resolving conflicting land use claims; and
• an institutional environment that imposes unnecessary costs on entrepreneurs and small businesses.

By addressing these weaknesses and continuing to support capacity-building efforts for conservancies, the Namibian government and the international donor community could further strengthen this exciting enterprise-based solution to poverty in Africa.